Answer:
The correct asnwer is : Journal entries
Bonds Payable 600,000
Cash: 600k6/1210%=30,000
Interest Payable 30,000
Explanation:
(a) Issuance of bonds:
Cash: 600k * 1.02 =612k
January 1st, 2014:
Cash 612,000
Premium on Bonds Payable 12,000
Bonds Payable 600,000
(b). Payment of interest and amortization:
Interest Expense: 612,0006/12.097705 = 29,897.73
Cash: 600k6/1210% = 30,000
July 1st, 2014:
Interest Expense 29,897.73
Premium on Bonds Payable 102.27
Cash 30,000
(c). Accrual of interest and related amortization:
Interest Payable: 600k6/12.1=30,000
Interest expense: (612k-102.27)6/12.097705=29,892.73
December 31st, 2014:
Interest expense 29,892.73
Premium on Bonds Payable 107.27
Interest Payable 30,000
